What’s Changing
The Australian Government has legislated significant personal income tax cuts aimed at easing cost-of-living pressures. These changes include:
- From 1 July 2026, the personal income tax rate for residents on taxable income between AU$18,201 and AU$45,000 will be reduced from 16% to 15%. (alliedaccountants.com.au)
- From 1 July 2027, the same bracket rate will be further reduced from 15% to 14%. (mallesons.com)
These cuts are additional to earlier cuts rolled out starting in July 2024. (ato.gov.au)
Who Benefits Most
These changes are targeted at low- and middle-income earners but apply to all resident taxpayers. Here are some illustrative examples:
| Income level | Tax savings from July 1, 2026 | Additional savings from July 1, 2027 |
|---|---|---|
| AU$30,000 | Approx AU$150/year | Further AU$30/year |
| AU$80,000 | Smaller absolute dollar change | Even smaller additional savings |
If your income falls in the lower bracket (AU$18,201–AU$45,000), you’ll see the largest percentage gains. Others will benefit proportionally less.
Actionable Tips to Leverage the Cuts
- Estimate your taxable income for 2026–27 and beyond to see if aligning payments or deductions into those years helps.
- Prepay deductible expenses, such as work-related items or investment advice, late in the 2025–26 year may accelerate growth in your take-home pay.
- Review your withholding rates with your employer or PAYG instalments—changes may reduce over-withholding.
- Watch for adjustments to Medicare levy thresholds, which are being lifted in line with CPI as part of cost-of-living relief. If your income is near those thresholds, this could mean paying less levy. (mallesons.com)
Practical Example
Sarah earns AU$40,000 in taxable income. Under current settings (2025-26), the first AU$18,200 is tax-free, next portion taxed at 16%. From 7/1/26, Sarah’s portion between AU$18,201-AU$45,000 drops to 15%, saving ~AU$150 per year. After 7/1/27, it becomes 14%, total annual saving ~AU$268 annually compared to 2024-25 settings. Supported by government data. (mallesons.com)
These tax cuts are now law as part of the Treasury Laws Amendment (More Cost of Living Relief) Act 2025. (au.andersen.com)